01 - Combine water, whole milk, and kosher salt in a medium saucepan. Bring the mixture to a gentle simmer over medium heat, ensuring the salt dissolves completely.
02 - Gradually whisk stone-ground grits into the simmering liquid while stirring constantly. This technique prevents lumps from forming and ensures even distribution.
03 - Reduce heat to low and maintain a gentle simmer. Cook for 20 to 25 minutes, stirring frequently to prevent sticking. The grits are done when tender and the mixture has thickened to a creamy consistency.
04 - Remove the saucepan from heat. Stir in unsalted butter and cream cheese until both are completely melted and incorporated into the grits.
05 - Add shredded sharp cheddar cheese to the grits. Fold gently until the cheese melts completely and the mixture becomes smooth and creamy throughout.
06 - Season with black pepper and cayenne pepper. Taste and adjust salt as needed. Serve immediately while hot, optionally garnished with additional shredded cheese or fresh chives.